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August West
Trad climber
Where the wind blows strange
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The housing bubble was one of those once in a generation things. Today is more of a standard business cycle coming to an end.
That is most likely true. But just because we had a once in a generation financial crises doesn't mean it will be another generation before we have another.
Typically after a huge crisis, legislation gets passed and people get gun shy. Eventually the legislation gets unwound, or skirted, and people lose their fear.
Modern finances are so complicated it was hard to design legislation to deal with the problem and lots of it either never got implemented at the regulatory level or has already been unpicked by a republican controlled government.
As for people being more conservative:
People are back to trying to maintain their living standards by using debt.
And various forms of leverage are sneaking back in much faster than after previous crisis.
We are in far worse shape to deal with a crisis. The politics are way, way worse. Can you imagine congress and Trump working together to deal with a fast moving financial crisis?
There were plenty of mistakes before the crisis. But once the crisis broke, the Treasury dept. and the Fed actually did a pretty good job of managing things and keeping the US out of the 1930's style, decade long depression. The hundreds of billions that congress authorized that was used to re-capitalize the banks was a key part of that.
I don't see the current congress passing similar legislation in the middle of a crisis. Way too much angry populism and lasting anger that the banks got bailed out in 2008.
Some of the "grey area" tools that the Treasury and the Fed used to manage the crisis have now been made explicitly illegal.
And the world finances are interconnected. For instance, if there was a sudden, un-managed, breakup of the EU and the Euro, Europe would suffer more than the US but it would be a much bigger hit than 2008.
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AKDOG
Mountain climber
Anchorage, AK
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A friend of mine changed all his portfolio to bonds a couple days before the first 700 point drop around Sept 14 2008. Good move.
The S&P 500 was trading at around 1200 in early September 2008; and is now trading around 2700, hope your friend got back in. No bond or bond fund has done that well.
Stocks for the long run, by Jeremy Siegel is a good basic read for anyone interested in stocks.
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Reilly
Mountain climber
The Other Monrovia- CA
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Stocks for the long run
Pretty sure that’s Vanguard’s mantra.
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EdwardT
Trad climber
Retired
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Rut roh
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August West
Trad climber
Where the wind blows strange
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Stocks for the long run
In the long run,
Yer gonna die.
Hey, somebody had to say it...
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ontheedgeandscaredtodeath
Social climber
Wilds of New Mexico
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I'm thinking about picking up some blue chips that pay dividends while the market is tumbling. I'm a buy and holder with nerves of steel. Any suggestions from the supertaco stock advisory council?
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blahblah
Gym climber
Boulder
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I disclaim any sophisticated knowledge of investing, but maybe understand the point of view recommended by the Bogle (Vanguard) and Buffet (what he recommends to retail investors, not necessarily what he does) types.
If I were interested in high dividend blue chips, I'd take a look at https://investor.vanguard.com/mutual-funds/profile/VHDYX
(I have thought about that, but ultimately came around to the point of view that high dividend paying stocks aren't the best long term play. If a company has nothing better to do with its money than return it to shareholders, consider how that may affect long term profitability.)
You have to be a little careful of conspicuously high paying dividend stocks (e.g., AT&T). Remember if something seems to be good to be true, it probably is.
Edit: Moose sort of beat me to the post, but dividend appreciation is not really the same thing as high dividends. I think my recommendation is more what the poster is thinking of.
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briham89
Big Wall climber
santa cruz, ca
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Gold and cash for now.
By cash do you mean, parking it in a savings account? I have gone to "cash" for a good amount of my portfolio, but by cash I mean I am invested in a Vanguard Federal Money Market account which is paying at least something now (2.21%, less a 0.11% expense) after the Fed has been raising interest rates.
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Fritz
Social climber
Choss Creek, ID
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Topic Author's Reply - Dec 6, 2018 - 10:04am PT
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Moose! That strategy, along with considerable investments in real estate & mining, worked well for noted American capitalist Scrooge McDuck, founder of Disney Studios.
And of course, just like you, he worked his way up to wealth.
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Reilly
Mountain climber
The Other Monrovia- CA
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Moosie, if you had invested $10K in gold 196 years ago yer investment would be worth $26K today.
If you had put it into bonds it would be worth $8 MILLION!
If you had put it into stocks it would be worth $5.6 BILLION!
Gold is for loozers!
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AKDOG
Mountain climber
Anchorage, AK
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I'm thinking about picking up some blue chips that pay dividends while the market is tumbling. I'm a buy and holder with nerves of steel. Any suggestions from the supertaco stock advisory council?
For what it is worth (exactly $0):
To diversify and reduce risk an S&P 500 index fund give you exposure to about 70% of the market and has a dividend yield currently of around 1.9%, with a very low expense ratio (<.1%)
Individual stocks carry higher risk and reward (recent good risk example is GE) and most would advise limiting your overall exposure to any individual stock or sector, but here are a few:
JNJ (dividend yield) 2.5%, ABBV 4.5%, XOM 4.3%, RPM 2.2%, JPM 2.8%
IF were going into a recession IMO people will still drink and smoke so I like DEO 5.8%, MO 5.8%.
Gold and cash for now.
pretty conservative advice. No reason not to have at least some exposure to the stock market.
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Jon Beck
Trad climber
Oceanside
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if you have the stomach for it shorting a growth REIT ETF might be profitable
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ontheedgeandscaredtodeath
Social climber
Wilds of New Mexico
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Thanks all! I probably don't even know enough to ask the right question! So, I have a 401k to which I make the maximum annual contribution and an S&P 500 index fund that I contribute to monthly. What's a logical next move? Is it better to just put more money in the index fund or balance things out somehow? Likely some other type of fund makes the most sense for me, as I like just making contributions and not paying that much attention.
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blahblah
Gym climber
Boulder
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Not sure this what you're getting at, but what is your 401(k) investment in?
You'd likely want to consider that to make sure that the combination of your 401(k) and S&P 500 gives the asset allocation you're looking for.
(And what asset allocation are you looking for? There's no right answer, but for most people, it's function of years to retirement and personal risk tolerance.)
As a tax point, you're better off putting your investments that pay more interest and significant dividends or capital gains in tax deferred accounts. In other words, if you've got a mix of stocks and bonds, get your bonds in your 401(k) and your stocks in a taxable accounts.
There's no way to know what will work out best, but standard advice along the lines of what I've mentioned may to put whatever you've got to invest in a target date fund (based on your expected retirement date) and don't worry about it. It's not at all clear that any amount of worrying and active trading will allow a retail investor to get better or safer returns.
This is sort of an obvious point, but I always have to remind myself: left to his own devices, the average retail investor will usually make poor market timing decisions. Market going into the crapper? Better sell to protect what you've got left. Market's been booming? Better get in on that. And where are we now? Booming market from a longer term perspective, tanking from shorter perspective. What do you do with that info?
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Fritz
Social climber
Choss Creek, ID
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Topic Author's Reply - Dec 6, 2018 - 12:15pm PT
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Reilly has a very gud point about gold, although I confess to buying some back when it was in the range of $600.00 oz.
Of course you have to remember what happened to the price of gold back in the 1950's when Scrooge McDuck & his nephews found the Lost Mines of the Incas in Peru.
http://www.supertopo.com/climbing/thread.php?topic_id=1578997&msg=1580282#msg1580282
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Reilly
Mountain climber
The Other Monrovia- CA
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One reason India remains poor is that as soon as they accumulate a little cash they buy gold,
often to bulk up a dowry. They buy a yuge amount yearly rather than investing it in saner things.
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Reilly
Mountain climber
The Other Monrovia- CA
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From the People Are Crankloons Dept:
A behavioral economist did a study. You can flip a coin to win $200 for heads or 0 for tails,
or you can pass and pocket $100. Most people (not all!) take the sure thang.
Now they said flip the coin to LOSE $200 for heads or 0 for tails, or pass and just pay $100.
Guess what? MOST people will take the gamble!
Obviously the testers did not assemble ‘contestants’ based on their investing acumen but it
clearly confirms that most people are crankloons.
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Reilly
Mountain climber
The Other Monrovia- CA
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briham, per yer latter article:
“Going into the FOMC minutes and subsequent Fed meetings, U.S. bonds look like an attractive risk-reward on the long side”
That’s why I’m long bonds - softens the equities pain now and they will pay off.
I’ll take less payoff if it means much less risk. And in regards to my previous post about
irrational behavior the bond markets are much more rational and, hence, more efficient.
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